5/06/2009 @ 6:30PM

Sprint's Boost Mobile Grows Up

As the economy slows, prepaid cellphone providers like Boost Mobile are picking up pace. But will these companies, which provide cellphone service without the yoke of long-term contracts, be as alluring when the economy rebounds?

Boost President Matt Carter is working to ensure the company prospers regardless of the economic climate. To keep up momentum, Boost is tweaking its marketing, expanding distribution, stocking cooler phones and targeting business users. Carter likens the company to an adolescent maturing into adulthood. “We’re growing up as a business,” he says.

Boost is coming off a big growth spurt. The company–a division of
Sprint Nextel
–added a record 764,000 customers in the first quarter, bringing its total number of users to 4.3 million. Carter says Boost expects to do just as well, if not better, going forward. “We see a huge demand for our offering,” he says.

Most of this demand stems from an innovative service plan Boost introduced in late January. Known as “Monthly Unlimited,” it offers users unlimited calls, text messages and Web browsing for $50 a month. Other prepaid carriers such as MetroPCS and Virgin Mobile charge more for the same package of features. Parent Sprint provides a similar service for $99 a month. The Monthly Unlimited plan helped Boost cut down on churn, the industry term for defecting customers, by 130 basis points compared with the fourth quarter.

Boost is sticking with the plan, says Carter. He doesn’t anticipate lowering prices further, noting, “We don’t want to get into a pricing game.”

To broaden its appeal, Boost is revamping its image. The company, which was founded in 2002 and is located in Irvine, Calif., has been associated for years with young, urban customers. Carter says he is striving to make Boost–and prepaid phone service in general–more mainstream.

A new endorsement deal with racecar driver Danica Patrick is part of the plan. New television ads starring Patrick will hit the airwaves soon. “We’re already seeing people like soccer moms join Boost,” says Carter. “Danica will help accelerate those efforts.”

Carter is also working on making it as easy as possible for consumers to sign up for Boost. The service is already available in 20,000 locations across the country, including
Radio Shack
,
Best Buy
,
Wal-Mart
and
Target
. The company is now focusing on opening Boost-branded stores. It currently operates three, in Houston, Miami and Los Angeles. Carter says seven more will pop up by the end of June for a total of 50 by year’s end.

Plenty of consumers choose their wireless service based on the phones available. That’s true even in a down economy. Boost currently offers four different phones from
Motorola
, including two candy bar-style and two flip phones. It will add a more sophisticated, Qwerty-keypad handset called the Motorola Clutch in the next few weeks and several more by the end of the year including, possibly, a touchscreen phone.

Though Boost is primarily a consumer brand, the company just hired a new sales manager to pursue small- and medium-sized firms. It is initially targeting people who work outdoors, in industries like construction and landscaping. The link? All Boost phones have walkie-talkie capabilities due to its network’s underlying technology, which it inherited from Nextel.

Boost’s recent upswing has given it a higher profile within Sprint. Carter says that as recently as a year ago, Boost had a distant relationship with its Kansas-based parent. As the division’s performance improved, so did communication, he says. During Sprint’s earnings call on Monday, Boost was mentioned 36 times.

The company’s ascent hasn’t been without growing pains. Subscribers recently complained of widespread text messaging delays–an embarrassment for Boost, which regularly boasts about its high-quality network. The company says the problem, which stemmed from its rapid growth, was quickly fixed through hardware and software upgrades. Carter says Boost “built out enough capacity” that the problem won’t crop up again.

An economic recovery could be the biggest obstacle for Boost. Carter argues that people will continue to want affordable wireless service, no matter how much the economy improves. “If we do our job right, we’ll make prepaid an acceptable, sustainable option,” he says. “The economy just gave us a platform to tell our story.”